Counting The Money: Saudi Influence In Egypt

With protests continuing in Egypt, public acceptance of the new military government's rule may rest on its ability to kick-start an economic recovery. Egypt's sputtering economy has brought electricity shortages, long lines of people waiting for diesel fuel and rising unemployment. It's one of the reasons that Egyptians took to the streets and ousted President Mohamed Morsi a couple of weeks ago.

This week, Egypt received a massive get well gift - $12 billion from Saudi Arabia, the United Arab Emirates and Kuwait. We called up Robert Powell. He's a Saudi Arabia specialist at the Economist Intelligence Unit and asked him to explain just how dire Egypt's economic situation is.

ROBERT POWELL: It's in a profoundly bad state. Since the fall of Hosni Mubarak, the balance of payments have been hemorrhaging about a billion dollars a month and they've been running down their foreign exchange reserves, which are akin to a savings account. In short, the clock has been ticking, which is why the $12 billion that is coming in from these oil-rich states is absolutely vital.

SIMON: And what moved these oil-rich states, as we always call them, to be so generous?

POWELL: Primarily it's political, particularly in the case of Saudi Arabia and the United Arab Emirates. Both countries are historically extremely antagonistic towards the Muslim Brotherhood, as you're aware. Mohamad Morsi, the president of Egypt who was removed, was from the Muslim Brotherhood and has several hundred members of their leadership are being arrested.

This is something that has won the approval of the oil-rich leaders who typically view the Muslim Brotherhood as a potential rival in the future.

SIMON: The U.S. gives Egypt $1.5 billion every year but after President Morsi's been forced out, there've been some calls in Congress to suspend a lot of that aid. The Obama administration says, in fact, it's reviewing its aid to Egypt. Is this just talk? Do you see any realistic chance that aid will be suspended?

POWELL: Well, it's unusual because typically people wouldn't want to get caught up in semantics. Is it a coup, is it not a coup? There was suddenly a popular movement behind the ousting of the Egyptian president. However, in this case, of course, there is a legal requirement for the U.S. administration to cut off its aid if a military coup has taken place.

The likelihood of the U.S. actually cutting off the money at this stage is not high and so far actually been has been exceptionally cautious in all its responses since the revolution. The U.S. is kind adopting a wait-and-see policy, hoping that a new democratic transition emerges, but they may well be disappointed.

SIMON: Do the U.S. and, say, Saudi Arabia, Kuwait and the Emirates share the same goals for Egypt?

POWELL: In the near term, everybody would prefer a stable Egypt. It's on the border with Israel, it's the most populous country within the region. It does have enormous potential, of course, economically, but because it's home of the Suez Canal through which around 8 percent of all the world's trade passes. So the Saudi money will certainly be welcome by the U.S. at the moment.

In the longer term however, Saudi Arabia would probably be far more comfortable with a regime that resembled that under Hosni Mubarak, in effect, a dictatorship. It's generally more comfortable with secular dictatorships in the Middle East than anything resembling a democracy.

For the U.S., it would be far more comfortable giving it's $1.3 billion a year to a country with a measure of accountability that had some respect for human rights. So there is actually a sharp divergence.

SIMON: But wasn't the United States pretty happy with the Mubarak regime up until the last few months?

POWELL: Within the region you had young populations disenfranchised for a long time, excluded from the rising economic wealth of a small coterie, often centered around the president. They were globally aware, they knew the other countries had democracy, they had accountability. So something was going to explode. So, this combination of unsustainable foreign policy on the part of the U.S. and inherent domestic changes within Egypt meant that there was going to be a sharp shift.

So really talking about what happened under Hosni Mubarak is no longer relevant anymore. It's what happens going forward. Can the U.S. have a similar foreign policy with a new Egyptian dictatorship? Probably not. It cannot repeat what came before 2011, so it's going to have to forge a new policy. At the moment, though, we're seeing very little.

SIMON: Robert Powell, Middle East analyst with The Economist joining us from New York. Thanks so much for being with us.